The search giant posted second-quarter earnings of 16 cents per share on $1.04 billion in revenue. Wall Street had expected Yahoo to deliver quarterly earnings per share of 18 cents on $1.03 billion in revenue, according to consensus estimates from Thomson Reuters.
Yahoo shares were down as much as 3 percent in extended trading.
The company reported a net loss attributable to it of $21.6 million, or 2 cents per share, in the second quarter ended June 30, compared with a profit of $269.7 million, or 26 cents per share, a year earlier.
In the post-earnings conference call, CEO Marissa Mayer called Q2 "a good quarter" and said she was particularly pleased with momentum in the display ad business.
Revenue, excluding traffic acquisition costs (ex-TAC), for the third quarter is projected to be between $1 billion and $1.04 billion. That is lower than earlier guidance of $1.07 billion.
Yahoo also announced a headcount of fewer than 11,000 employees, in cost-cutting efforts. The company employed about 12,300 in the year-earlier period.
"In addition to revenue outperformance, we reduced $30 million in sequential cash operating expenses driven by strategic headcount and footprint reductions, tight management of our discretionary costs and the benefit from IP monetization," said CFO Ken Goldman in the release. "As we continued to reduce our workforce to fewer than 11,000 full-time employees over the last quarter, we have also continued to realign our resources as we become a more efficient business."
Last week, the company detailed more information about its planned spin-off of its remaining stake in Alibaba in a newly formed independent entity to be called Aabaco. Earlier in the year, Yahoo announced it would spin off its 384 million shares of Alibaba, valued at nearly $30 billion.
Aabaco will represent an ownership interest of about 15 percent in Alibaba, the company said. The spinoff is expected to be completed in the fourth quarter of 2015 and is pending final approval by Yahoo's board of directors.
This month the company announced the launch of Yahoo Sports Daily Fantasy. It will offer fantasy contests for cash prizes. The site will parallel Yahoo's seasonlong fantasy leagues already offered for free.
Shares of Yahoo are down about 20 percent year-to-date.
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—Reuters contributed to this report.